Strategy: Lessons from Texas Hold’em

I don’t play cards, but I enjoy watching Texas Hold’em poker on TV. One might think that watching other people play cards would be boring. On the contrary. Poker games present a microcosm of strategy, tactics, personality traits and clues. I’ve learned a few important lessons about corporate strategy while watching these games.

If you’re going to play a hand, bet based on the effect you want to have around the table (market) rather than betting based on the actual strength of your hand.

Use your position at the table to lure your competition into an uncompetitive position.

When you believe you have the best hand, play it for the long haul rather than just using it to grab a quick win.

All you need is a chip and a chair to play. Many players have rebounded from near zero to win the tournament.

Two or three solid wins will turn an also ran back into a chip leader.

Play a tight game early in a tournament while evaluating the competition.

Play an aggressive game once you understand the other players.

When playing head-to-head with a competitor, take no prisoners.

An example of betting for the effect you want to create around the table: The commercial airliner industry has evolved into a heads-up game between Boeing and Airbus. In the late 1990’s and early 2000’s, Boeing and Airbus were competing head-to-head in the long-haul airliner market. Boeing was promoting a proposed new 747-X and Airbus was designing the A380. Boeing determined that the market was not large enough to justify the development and manufacturing expense for a new 747-X model.

In 2001, Boeing started a PR campaign that “represented” a bet on a super-sonic long-haul airliner, the Sonic Cruiser – a replacement for the aging and soon to be discontinued Concorde. This would have been a serious competitor to Airbus’ market position in long-haul Pacific markets… if it could have been priced low enough, been fuel efficient enough, been quiet enough, and if technology problems could be resolved. Boeing’s PR “bet on the table” created the impression that all those uncertainties were resolved. Airbus responded by committing additional investment in the A380 – a monster airplane only suited to long-haul hub-to-hub transport. This is an important market, but also a relatively small market.

Once Airbus bet “all-in” on the A380, Boeing laid down their real cards. Whether Boeing’s Sonic Cruiser ever makes it to the market, the hand they had been holding during this tournament was a product line of super-efficient short-haul airliners – the 787. This is a huge potential market that includes not only hub-to-spoke transport, but also the expected return to point-to-point one-hop transport. With nearly all their resources tied up in the 380, Airbus was not able to respond to Boeing’s real competitive threat for years. Score one for Boeing.